1. There is still a market for new ASC development. While new ASC development has slowed over the past few years, there is still a need for new outpatient facilities; expect to see new ASCs in underserved regions, especially as joint ventures between physicians and hospitals.

"We are seeing both single specialty and multispecialty ASCs continue to grow in scale," says Joseph Ibrahim, Principle, Healthcare, The Riverside Company. "There are about 8,000 ASCs nationwide and we are seeing continued geographic expansion within that segment. Many now have started as a joint venture with physicians where the physician is the primary stakeholder. New centers are looking at a fully integrated model with hospital partners."

Existing ASCs with the volume to grow are expanding within their markets and into new marketplaces in response to patient demand. "You are seeing private standalone ASCs continue to grow and serve their patient populations," says Mr. Ibrahim. "They are trying to drive density in geographic regions in order to capture as much of the commercial insurance business as possible and to achieve favorable negotiating rates with payors."2. More ASC transactions are likely to occur in the short and long term. As the United States healthcare system continues to evolve, there will likely be continued activity in ASC mergers and acquisitions. Additional factors, such as high equipment costs and lower reimbursements, may lead to increased activity, along with surgeons of mature ASCs looking for an exit strategy.

"I see continued opportunities to build and sell ASCs in the short and long term because they do provide a high level of care — a high level of complex care — in a lower cost setting versus the inpatient acute setting," says Mr. Ibrahim. "It's a lower cost setting because you don't have the hospital overhead, and from a managed care perspective reimbursement for the same procedures in the ASC is lower."

Currently, management companies and health systems are looking to acquire well-functioning independent ASCs as these cases transition, and Marty Heath, Director, Product Marketing at Provista, sees these opportunities to continue for the next several years. Other experts in the industry concur.

"We're seeing a fair amount of activity from both public companies and surgery center chains as well as hospital systems," says Nicholas Newsad, MHSA, Senior Associate at HealthCare Appraisers. "Both to minority and majority ownership interests and I would say we expect to see robust activity for the next several years at least."3. Funding for healthcare projects remains limited. Despite being on the upside of a slowly recovering economy, funds remain limited in many healthcare organizations. Declining reimbursements and other financial pressures have forced organizations to become more tight-fisted.

"Capital is an ongoing issue for both hospitals and surgery center companies to fund their acquisitions," says Mr. Newsad. "A health system or management company might have several strategic options for growth, but only so much capital, so they have to compare their various new business opportunities. It could become a competitive environment for ASCs looking to sell their centers. A health system might have 10 different projects they could invest their capital in and they have to pick a limited number."4. ASCs will drift toward more specialization. Government and private payors have begun to shift from fee-for-service to pay-for-performance, and many have already begun requesting outcomes data. At some point in the future, new payment models such as bundled payments and accountable care organizations will place additional risk on providers to deliver complication- and infection-free care; these factors produce a more focused approach to providing care.

"I believe we are going to see ASC models that are outcomes-driven, and they will be more specialized in these types of procedures," says Mr. Ibrahim. "The reason is because as an ASC platform, a specialized center will be able to drive more efficiency through the system."

Well-documented reports have shown that surgeons and surgical teams focused on one key specialty or subspecialty often develop more efficient processes and better outcomes because of the repetitions. Additional marketing opportunities are available for ASCs that can truly show their outcomes and cost-effectiveness makes them the "go to" place in the community for their specialty.

"As surgery centers become more specialized and profitable, they will try to expand what they do," says Tom Aronson, Managing Director at Monroe Capital. "But there will be continued consolidation as people strive for cost efficiencies. You are going to see them strive for consolidation and efficiency as reimbursement breaks are finalized. It's hard to predict, however, I believe there will always be a niche for a well managed low cost ASC provider in the marketplace."5. Strength in numbers will encourage ASC consolidation. Across the healthcare marketplace we are seeing a trend toward consolidation; more physicians and surgeons are becoming hospital employees, private practices are merging to become larger groups and surgery centers are joining larger chains to benefit from aggregated power.

"As with the health industry in general, there is a strong trend for ASC providers to aggregate into bigger groups," says Mr. Heath. "These larger provider systems benefit from better positioning to serve communities of patients, better access to capital and technology needed and greater economies of scale to create efficiencies in their supply chain."

"Healthcare reform represents a long-term change in the economic model for healthcare with different incentives," says Mr. Heath. "The trend for aggregation is likely to continue before reaching a stabilization point. Consolidation will not always include 'merger,' but the evolution towards bigger provider organizations will continue."Surgery centers are losing some of their lower acuity cases, such as pain management injections or simple eye procedures, to in-office settings. At the same time, higher acuity cases like orthopedics and spine surgery are moving out of the inpatient acute care se

6. Case volume will remain steady, but case type will change. Surgery centers are losing some of their lower acuity cases, such as pain management injections or simple eye procedures, to in-office settings. At the same time, higher acuity cases like orthopedics and spine surgery are moving out of the inpatient acute care setting and into the outpatient ASC.

"ASCs represent an important part of the delivery system in the healthcare reform world; cost reduction pressures and technological improvements will continue to push procedures out of acute-based ORs to ambulatory care settings," says Mr. Heath. "The overall effect is that the acuity of the procedures is likely to rise in ASCs, but the number of procedures is likely to remain the same."

ASCs focused on low acuity procedures must strengthen their relationships with physicians to maintain case volume, or switch their focus.

"There are several challenges facing ASCs and the first is navigating their interdependencies with surgeons," says Mr. Heath. "ASCs always need to strive towards building strong relationships with their referring physicians. Physicians, for their part, are better able and more willing to perform procedures in their office which they would once have performed in an ASC. Managing that balance is important at the individual facility level."7. More cost saving opportunities are now available to support ASC growth and development. Technological advancement will allow for increased efficiencies and cost-saving opportunities in the ASC setting, and because ASCs are often smaller entities, they can respond to change more quickly than large hospitals and health systems.

"For individual facilities to expand, they will need to attract more physicians to practice there," says Mr. Heath. "Part of that attractiveness is making sure that the facilities can meet the surgeons' needs for the equipment and supplies they prefer. [We are also] seeing an increasing sophistication on the part of ASC leaders on recognizing the importance of their supply chain."

In a recent survey Provista conducted, they found about half of ASCs continue to track purchasing and inventory with a spreadsheet instead of automated electronic systems.

"This can result in price discrepancies and wasted inventory through expiration but can be solved through technology that makes managing materials more cost efficient," says Mr. Heath. "Even a small ASC has tens of thousands of dollars of waste and inefficiency which could instead be used to finance expansion, acquisition or investment in patient, physician or employee retention."8. Surgeons and patients still want cases at the ASC. There are several benefits for surgeons performing cases in ASCs, oftentimes the most prominent being the increased control they have over their surgical setting.

"Doctors continue to like the control, flexibility and outcomes of the various procedures performed in ASCs," says Mr. Aronson. "I think there is certainly room for new centers to come, and managing and monitoring outcomes and procedures will be key to generating efficiency and quality of care. If the facilities have good management, there is certainly room for more ASCs."